Boxee Raises $4 Million To Take On Apple TV, Microsoft, Cable

NYC-based software startup Boxee has raised $4 million to take on heavyweights like Apple (AAPL) and Microsoft (MSFT) as the companies race to be the ones who connect your living room TV to the Internet.

Boxee's set-top box software runs on Macs, Linux PCs, and via a clever hack, on Apple TV devices. The point: An easy interface to watch Web video like Hulu and CBS shows on your TV or laptop, listen to Internet radio like Last.fm, or watch movies from your computer's hard drive. There's also a requisite "social" layer, which lets you tell your friends what you've been watching, get recommendations, etc. For pre-beta software, it looks good and works well.

Union Square Ventures and Spark Capital, who have been doing a bunch of deals together lately, split the round down the middle. USV's Fred Wilson (SA 100 #1) and Spark's Bijan Sabet (SA 100 #56) join the board.

The money will help CEO Avner Ronen and his team negotiate for content deals -- such as getting Netflix (NFLX) or Amazon (AMZN) streams to work on Boxee systems; and gadget deals to get Boxee built onto devices. Ronen says Boxee is aiming for 1 million users by the end of next year.

The challenge: Being the "open" one in a market full of big companies who like to control everything. We don't see Apple officially inviting them onto Apple TV, Microsoft officially inviting them onto the Xbox 360, or Comcast (CMCSA) inviting them onto their set-top boxes.

So Boxee's challenges are threefold: Making their software as good as possible, getting onto the right devices, and hoping another company doesn't bridge the Web-to-TV gap faster and better. The good news: No one has won this challenge yet. And while we think the cable industry has the upper hand, it's still early.